Dunamu, the operator behind cryptocurrency exchange Upbit, is finding itself in hot water after South Korean regulators slammed it with a 35.2 billion won (over US$24 million) fine for multiple breaches of anti-money laundering and customer verification laws.
The Financial Intelligence Unit (FIU) announced its decision to fine the company on Thursday after months of deliberation over violations of the Specific Financial Information Act.
Dunamu reportedly failed to comply with customer identification regulations, and this involves millions of cases. It also neglected its duty to report suspicious transactions, according to the watchdog.
The fine is the culmination of a series of enforcement actions against the exchange operator, following a three-month partial business suspension and disciplinary measures against executives earlier this year.
A long-list of compliance failures
The FIU stated that following its investigations, it found that Dunamu had over 8.6 million violations, and 5.3 million of them involved failures in customer identification procedures. The FIU said Dunamu had accepted photocopies and rephotographed images of identification documents that made it impossible to fully verify users’ identities.
In some cases, customer addresses were left blank, poorly recorded, or not correct at all, while others bypassed mandatory re-verification cycles.
The other 3.3 million violations are connected to Dunamu’s failure to restrict transactions by users who had not completed the required verification process. This is a major breach of South Korea’s financial regulations, which require virtual asset operators to suspend or limit transactions until identity checks are fully completed.
The FIU added that there were 15 instances of unreported suspicious transactions on Upbit. These involved cases in which there were reasonable grounds to suspect illicit activity, but no report was filed with the financial authority.
Dunamu has been given ten days to submit its comments on the matter before the sanction is formally enforced.
Dunamu still has a regulatory headache
In response, Dunamu said it accepted the regulator’s decision and would improve its systems to protect investors and prevent the same incidents from recurring.
However, the operator and FIU are already engaged in a separate legal dispute.
In March, Dunamu filed an administrative lawsuit seeking to overturn a partial business suspension imposed in February for conducting transactions with unreported virtual asset operators.
The suspension, which restricted new users from making crypto deposits and withdrawals, was temporarily halted after a court granted a stay of execution later that month.
Operators wary of being on the regulator’s wrong side
The watchdog said in a statement that “The FIU will continue to review and inspect the legal compliance systems of virtual asset operators.” It added that if it discovered any violations, it would take “strict measures in accordance with relevant laws.”
The FIU’s actions send a clear message that no one is immune from tough enforcement, and the latest fine on Dunamu may prompt other domestic platforms, such as Bithumb and Coinone, to conduct internal reviews of their customer due diligence processes and ensure that they are and have been compliant.
If they haven’t, then they may soon be making headlines for the punitive measures the regulator may impose on them for their non-compliance.